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2013 (2) TMI 353 - HC - Income TaxEntertainment tax exemption in respect Multiplexes - capital or revenue receipt - assessee contested that the subsidy received was after the completion of the cinema house and commencement of operation and used entirely for the business operation - Held that:- Considering the provisions of the State Government Scheme it can be clearly seen that the entire purpose of granting tax exemption was for giving the boost to the terrorism sector. This was to be achieved by attracting higher investment in areas with tourism potential. In order to achieve such purpose, exemption from various taxes as may be applicable was granted. It is true that the exemption was to be computed in terms of tax otherwise payable by the industry. However, the purpose of such exemption was to meet with the capital outlay already undertaken by the assessee. Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. From the combined reading of salient features of the scheme, no doubt in conluding that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee. As decided in Sahney Steel & Press Works Ltd. (1997 (9) TMI 3 - SUPREME COURT) the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined having regard to the purpose for which the subsidy was given. The very purpose of the scheme thus was to give incentive to the multiplex units which were found to be highly capital incentive - uphold the decision of the Tribunal in this respect to treat the exemption as capital. Whether the amount set aside by the assessee to provide for meeting liabilities other than ascertained liabilities was required to be added back while computing the book profit u/s. 115JB or not? - Held that: - As decided in Bharat Earth Movers v. CIT [2000 (8) TMI 4 - SUPREME COURT] the amounts set apart by an assessee to meet its liability on account of leave encashment of employees is not a contingent liability. It was observed that what should be certain is the incurring of the liability which should also be estimated with reasonable certainty though the actual quantification may not be possible then. Its requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. Also see Metal Box Co. of India Ltd. v. Their Workmen [1968 (8) TMI 53 - SUPREME COURT] wherein held that an assessee can while working out its net profits, provide from its gross receipts his liability to pay a certain sum towards gratuity liabilities of the employees. If such liability is properly ascertainable and it is possible to arrive at proper discounted present value. Also see Rotork Controls India (P.) Ltd. v. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA]. Thus no hesitation in upholding the Tribunal's view that though actual payment of gratuity may be made at a later point of time upon periodical release of the employees from service, it is provision having been made on actuarial basis it cannot be stated to be an uncertained liability so as to add it back in terms of Clause (c) to Explanation 1 to Section 115JB.
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